InvBrief – Autumn 2017

Property investment market – Autumn 2017

Following the party conferences and with the Brexit negotiations continuing we are now entering into a period that will potentially define the growth and economic map of the UK for decades to come. This is against a background following the snap general election in June in which Brexit is to be delivered with a minority government.

Notwithstanding the political and Brexit uncertainty, economic indicators remain generally positive. GDP grew by 1.2% in Q2 2017 (year on year) and employment reached 75.3%, the highest since comparable records began in 1971. With CPI reaching 2.9% in August 2017, analysts are now suggesting that a near term rise in interest rates is likely.

The UK property market has remained resilient with overseas investors continuing to find the UK market attractive. Total returns in the year to June 2017 were 5.5% despite the rental growth rate remaining largely static over the last 18 months. The industrial property sector was the best performing sector in the year to June 2017 driving the continued contraction of equivalent yields.

In light of this better than expected performance of the UK property market, we have revised our total returns forecast for the 2017 calendar year up to 6.6%. We remain upbeat about UK commercial property, despite the uncertainty surrounding Brexit. We believe that the current underlying economic fundamentals in the UK commercial property markets will continue to drive returns in the short to medium term future. Interest rate rises may however begin to see an erosion of this confidence.